Indian Pharma Companies Seek Innovation Incentives

The Indian Pharmaceutical Alliance (IPA) petitioned the country’s government last week, in an effort to prioritize innovation incentive policies for pharmaceutical manufacturers in the country’s 2014-2015 budget. India is best known for manufacturing generic drugs, however the IPA feels that a government-based strategy of grants and soft loans would promote increased drug discovery in the private sector, Live Mint reported.

 “The whole procedure is so cumbersome that it doesn’t naturally encourage people to take that kind of bet,” said Satish Reddy, chairman and managing director of Dr. Reddy’s Laboratories and president of IPA. “To spur innovation in this country we would expect a policy framework which would incentivize innovation.”

Indian pharma companies now rely on tax incentives, grants, and soft loans from the government because of weak interest  in drug discovery from venture capital and private equity firms because of its high risk — and cost.  In fact, discovering and developing a single molecule expenditures range between $250 to $500 million and takes about 10 to 12 years, with only a 1 percent commercial success rate.

Currently, the Central government provides a weighted tax deduction of 200 percent for any capital and revenue expenditure incurred on in-house research and development (R&D) by a company, excluding land and building expenses.

 Reddy believes that industries and universities need to work together for R&D, setting up what he called “incubation centers” under both public and private partnerships. To accomplish this, he said India’s upcoming budget should increase weighted tax deduction on R&D to 250 percent, so the benefits would “include R&D expenses incurred outside the facility like bio-equivalence studies, clinical studies, patent filings, and product registrations.”

Kiran Mazumdar-Shaw, head of India-based pharma company Biocon, echoes Reddy’s sentiment, telling Reuters that Biocon has restricted clinical trials because of India’s recent quality run-ins with the U.S. FDA, as well as slow approval rates of drugs in clinical trials.

“The difficulty in conducting clinical trials is the biggest deterrent for drug development,” Mazumdar-Shaw explained. “The incentives for R&D should extend to overseas development costs as well as patenting. This is vital for global competitiveness.”

India’s pharma industry has become most known for its generic drug production, especially after $80 billion worth of brand-name drugs went off-patent in the past five years. In fact, the country exported $14.84 billion in drugs in 2013-2014. However industry analysts expect this successful run to plateau because of new generic players entering the market and increased regulatory oversight.